JacobBunge

NYSE Euronext
NYX, +0.20%
shareholders are lined up to approve a planned merger with Deutsche Boerse AG (DB1.XE) that would end 219 years of independence, though concerns linger about how regulators might dilute the claimed benefits of creating the world's largest venue for trading stocks and derivatives.

The Big Board parent is seen easily surpassing the 50% of shares-voted threshold at a special meeting Thursday, according to people familiar with the situation, the first hurdle to sealing a pact reached in February.

A sterner test comes July 13, when the German company must secure 75% of shares outstanding for the deal to progress past the debris of other planned exchange combinations, following an outbreak of industry consolidation that has waxed and waned since last October.

Three planned exchange deals have already collapsed this year, including the competing NYSE proposal led by IntercontinentalExchange Inc.
ICE, -0.63%
and Nasdaq OMX Group Inc.
NDAQ, -0.42%
which foundered on U.S. antitrust concerns.

NYSE and Deutsche Boerse have sweetened their own plan with a special dividend that raises the offer terms to roughly $10.4 billion, as per Tuesday share prices, with the German company's investors holding 60% of the enlarged entity.

Executives from both companies have held more than 400 investor meetings to solicit approvals, with the biggest question centered on how European officials will view the marriage of the region's two dominant venues for listed derivatives, Deutsche Boerse's Eurex and NYSE's Liffe.

NYSE Chief Executive Duncan Niederauer--who would lead the new company--and other executives in the past month have traveled to California, London, Chicago and elsewhere to visit more than 100 of its biggest investors, separately traveling to Germany to meet with holders of Deutsche Boerse.

"The tone in most of these meetings was very positive," Niederauer told NYSE staff in a message last week. A spokesman for the company declined to comment further.

Just over 6% of Deutsche Boerse shareholders had backed the plan as of last week, though the bulk of submitting shares for such tender offers typically takes place in the final few days, and Deutsche Boerse has the option of extending the acceptance period. Investor-owners of the German exchange operator must tender shares in favor of the deal to get the special dividend payment.

The European Union's Competition Commission last week formally opened its review of the NYSE-Deutsche deal, issuing a 177-question survey to banks, trading firms and other groups to understand whether the merger would raise monopoly fears around trading services or information.

"We're not opposed in principle to exchange mergers," said Rob McIvor, a spokesman for the Association for Financial Markets in Europe, an industry body. "What we would like to see is some detail on what the benefits to the exchanges' users would be, and whether that's going to drive down costs through some form of consolidation or shared services or better access."

Regulators expect industry responses to the questionnaire by the end of this week, he said. The EU Competition Commission has until Aug. 4 to determine whether an additional 90 days is necessary to examine the deal, which is seen as likely. NYSE and Deutsche Boerse already have been meeting informally with regulators for months and continue to target closing by year-end.

Niederauer and Reto Francioni, his counterpart at Deutsche Boerse, have said they expect no major divestitures to be forced by regulators.

The exchange groups are seen open to discussing remedies around the relatively few areas of overlap across their derivatives platforms, according to persons familiar with the matter. Both companies run small European dairy and carbon markets and trade some of the same single-stock futures.

Seen as more touchy are any questions that may arise from the partners' enlarged clearinghouse. If antitrust regulators push to broaden access for competitors, a combined Deutsche Boerse-NYSE could find itself at a disadvantage to U.S.-based futures giant CME Group Inc.
CME, -0.96%

Shareholders have expressed concern that NYSE and Deutsche Boerse do not give too much ground to complete their industry-reshaping deal.

"You're trusting management not to destroy value in the regulatory process," said one investor, who was not authorized to publicly discuss his firm's investments. "These guys are probably going to do it no matter what."

The name of the combined exchange group remains undetermined, as CEOs Francioni and Niederauer prioritize shareholder meetings and integration planning. NYSE Euronext's Andrew Brandman and Deutsche Boerse's Jens Hachmeister have been tasked with leading integration of the two companies, which intend to move trading to a single technology system.

A decision on the name could come in the fall, Niederauer said last month.

Current share prices value Deutsche Boerse's deal for NYSE Euronext at $36.09 per share, or about $9.46 billion. The companies in mid-June planned a special dividend of two euros per share upon closure of the merger, adding another $905 million to the valuation.

Speculation that the rival bid from Nasdaq OMX and ICE could force Deutsche Boerse to improve deal terms with NYSE Euronext pushed its shares to a one-year high of $41.60 in May, translating to a market value of $10.9 billion. Shares closed Tuesday at $34.67.

"In the absence of a competing offer the choice is either to merge or stay on your own because the deal isn't rich enough," said James Rothenberg, an investor in NYSE Euronext. "Merging with Deutsche Boerse makes sense."

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